Section 200 Companies Act: Central Government or company to fix limit with regard to remuneration

Section 200 of Companies Act: Corporate Governance & Statutory Compliance

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Notwithstanding anything contained in this Chapter, the Central Government or a company may, while according its approval under section 196, to any appointment or to any remuneration under section 197 in respect of cases where the company has inadequate or no profits, fix the remuneration within the limits specified in this Act, at such amount or percentage of profits of the company, as it may deem fit and while fixing the remuneration, the Central Government or the company shall have regard to:—

a. the financial position of the company;

b. the remuneration or commission drawn by the individual concerned in any other capacity;

c. the remuneration or commission drawn by him from any other company;

d. professional qualifications and experience of the individual concerned;

e. such other matters as may be prescribed.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 200

Section 200 empowers companies to determine and restrict managerial remuneration within prescribed statutory limits based on objective corporate financial metrics, individual qualifications, and Remuneration Committee recommendations.

Corporate Discretion to Fix Lower Limits: Empowers the company (or Central Government where applicable) to fix managerial remuneration at an amount lower than the maximum statutory percentages specified under Section 197.
Statutory Evaluation Parameters: Mandates consideration of comprehensive parameters: the company's financial health, remuneration drawn by the director in any other corporate capacity, their professional competence, and their contribution to enterprise value.
Remuneration Committee Primacy: Requires that remuneration caps and structures be calibrated pursuant to the formal recommendations of the Nomination and Remuneration Committee (NRC) under Section 178.
Post-2017 De-Bureaucratization: The Companies (Amendment) Act, 2017 largely removed bureaucratic Central Government approvals, placing the responsibility on corporate boards and shareholder special resolutions to enforce objective compensation limits.

Key Landmark Precedents:

Barium Chemicals Ltd. v. Company Law Board, AIR 1967 SC 295: The Supreme Court laid down that statutory powers regulating corporate management must be exercised reasonably and grounded upon relevant objective data rather than arbitrary discretion.
Canara Bank v. V.K. Awasthy, (2005) 6 SCC 321: Affirmed that statutory and institutional determinations of remuneration must conform to procedural fairness and rational standards, precluding capricious or unreasoned executive compensation payouts.

Courtroom Practice & Strategic Litigation Guidance:

When drafting general meeting explanatory statements under Section 102 for executive remuneration, explicitly demonstrate compliance with the Section 200 parameters. Document the NRC's benchmarking analysis regarding the director's specific role, industry standards, and debt-equity profile to immunize the remuneration resolution from minority shareholder oppression challenges.

Section 200: Central Government or company to fix limit with regard to remuneration

Section 200 of Companies Act: Corporate Governance & Statutory Compliance

Legal Commentary & Landmark Judgments: Section 200